Will Boeing Be Hurt by New Japanese and Chinese Planes?

November 11, 2015 by Douglas A. McIntyre

Boeing Co. (NYSE: BA) management says its future is in Asia. Its road there may be partially blocked, as China and Japan recently launched home-grown planes that will challenge Boeing for carrier sales.

Boeing’s famous 20-year market outlook forecasts that over the next two decades demand will reach 38,050 planes with an aggregate value of $5.6 trillion. Of those, 14,330 will be sold in Asia.

Japanese companies have not built their own commercial jet in over half a century. Some of these companies showed off the new Mitsubishi Regional Jet. It holds 92 passengers, so it only competes with a small part of Boeing’s market. However, it is virtually guaranteed the makers of the jet will expand into the lucrative larger jets. With their new technology, they would be foolish not to do so.

The larger threat to Boeing is a new plane introduced in China. The aircraft is called the C919. It will carry up to 174 people, which makes it a competitor to Boeing’s mid-sized passenger aircraft. The C919 is built to cover distances that would be perfect for internal travel between China’s largest cities. The C919 has a distinct advantage over Boeing planes. It is made by the Commercial Aircraft Corporation of China, which is owned by the government. Chinese airlines may well be encouraged to buy a locally made product over ones built by a company based in the United States. China has not been above that kind of behavior in the past, which has included products and services from other state-owned enterprises.

Boeing’s forecasts do not take into account the chance that the jets made by Japanese and Chinese companies will become a very large portion of the market. Rather, Boeing expects to compete with Airbus and makers of smaller planes, including Canada’s Bombardier, which is in financial trouble and likely will be bailed out by the government. If the bailout is successful, Bombardier will stay as a major competitor in the small passenger jet market.

So far, it is not possible to forecast how the planes built in China and Japan will affect the global market. They are apparently well funded and technologically advanced enough that they will present some barrier to Boeing’s plans, particularly in Asia.

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